It is expected that China's gasoline price drop will slow in late May primarily due to more intensive refinery maintenance and a narrow oversupply, despite market players staying bearish, per OilChem survey.
Source: Mysteel OilChem
OilChem prediction model showed that China's daily gasoline consumption is likely to rise 1.8% month on month (MoM) at 445,000 tonnes/day in May, down 3.9% year on year (YoY). The monthly increase has been enabled by the travel peak during the Labour Day holiday, and the rising use of vehicle air conditioners in late May when the temperature jumps.
Source: Mysteel OilChem
However, the electric vehicles (EVs) are likely to be more popular in mid and late May based on their use scenarios, in addition to booming total EV ownerships, thus slightly reducing the gasoline consumption.
On a year-on-year basis, the 7-day moving average of Baidu Migration Index, an index gauging the migration of population in China, was down 1.8% YoY over May 1-13, indicating less robust daily gasoline consumption compared with last year.
China's daily gasoline production is estimated at 477,000 tonnes/day in May, flat MoM and up 0.2% YoY.
Source: Mysteel OilChem
Specially, the state-owned refineries have kept the gasoline production high in May in the face of moderate profits and relatively low in-plant inventory. For independent refineries, the production will be supported by the lucrative profits and high yield rates, despite intensive plant maintenance.
Meanwhile, the gasoline exports have been planned at around 0.7 million tonnes in May, up approximately 0.2 million tonnes from April.
Taken together, China's gasoline inventory is likely to rise 0.3 million tonnes at 17.60 million tonnes by end-May, a medium level in history, indicating little inventory pressure among state-owned refineries, traders, and independent refineries.
In conclusion, though the gasoline prices dropped rapidly in the first half of May due to broad bearish attitude among market players, the price drop is likely to slow in the second half on narrow oversupply and more intensive refinery maintenance, in addition to the bears paying off already.
Meanwhile, it is expected that there will exist some orders in late May which are to be delivered in the second half of June, and some traders will start to build stocks for the demand peak in July, offering certain support to gasoline prices.
Written by Aggie Hu, huchenying@mysteel.com
Edited by Navy Liu, liuchuanjun@mysteel.com